Britain spending more on benefits than Scandinavians with 7 out of 10 children living in a home receiving handouts

Britain spending more on benefits than Scandinavians with 7 out of 10 children living in a home receiving handoutsAround 2.1 million children live in a home where no adult is workingLess-well off have become enslaved to state benefits, study says

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UPDATED:

22:10 GMT, 21 December 2012

Britain pays out more on welfare than high spending social democratic nations in Scandinavia, according to a think-tank.

Nearly seven out of ten children now live in a home that receives at least one cash handout other than child benefit, says the hard-hitting study by the Institute for Economic Affairs.

And some 17 per cent of children – around 2.1 million – live in a home where no adult is working ‘easily the highest rate in Europe’.

Enslaved: Rising unemployment has created an environment where the less well-off have become dependent on welfare, the study found. (File photo)

The think-tank’s report, Redefining the Poverty Debate, spells out how a generation of the less well-off have become enslaved to state benefits that have done little to cure the problem of poverty.

It says: ‘Social expenditure in the UK stands at one of the highest levels in the world.

‘In
terms of overall social spending, the UK has overtaken traditionally
social democratic nations such as the Netherlands, Norway and Finland.

‘In terms of family benefits (spending on items such as child tax credit, child benefit, childcare subsidies) the UK has overtaken all of the Nordic countries.’

Figures published by the Organisation for Economic Cooperation and Development last year show that Britain spends 3.6 per cent of national income on benefits for families.

That compares with 3.4 per cent in Sweden, 3.3 per cent in Denmark, 2.9 per cent in Norway and 2.8 per cent in the Netherlands.

Kristian Niemietz of the IEA writes: ‘The conventional textbook distinction between a high-spending Nordic model and a lowspending Anglo-Saxon model has become completely obsolete.

‘The state has become a major income provider for well over half the population.’

For households in the bottom 20 per cent of the income scale ‘the government is the main breadwinner, with cash benefits representing by far the most important income source’.

Mr Niemietz added: ‘What is more
remarkable is that, in the second quintile, cash transfers also
contribute almost as much to total income as market earnings.

Even households in the middle quintile receive a quarter of their income directly from the state.’

The report also calls for radical
reforms to welfare spending to end penalties in the system that makes
families ‘financially better off’ to split up.

Dependent: The study highlighted that the Government is the main breadwinner for families in the poorest 20 per cent

CHILDCARE IS A 'LUXURY'

Childcare has become ‘a luxury good’ thanks to soaring costs that are crippling families and deterring parents from going to work.

The IEA report found that a typical family spends more than a quarter of disposable income on childcare costs.

The think-tank says childcare should be deregulated, potentially saving a typical family 320 a year.

Its report said: ‘Childcare has become a luxury good, even though there is nothing inherently expensive about it, since it is neither a capital intensive nor a hi-tech sector.’

The report found that a couple with two children both working 16 hours a week would receive 11,545 in tax credits and child benefit, while a single parent with one child working would receive 8,160, meaning the same couple could earn more than 16,000 if they separated.

The report warns that even the government’s new universal credit system will do little to iron out the problems.

It argues that the average family could be 745 better off if ministers backed more planning reforms to reduce house prices, reformed the Common Agricultural Policy to slash food costs, reduced sin taxes on alcohol and cigarettes, removed subsidies for green energy and deregulated childcare services.

Calling for a radical rethink of how to tackle poverty, the report found that sin taxes eat up 10 per cent of the disposable income of the poorest families.